Mandatory rules, contractual obligations, policies, activities, events or any other formal communication put forward by OEMs/Vendors that shall be adhered in totality in a periodic manner by the appointed distributor. Vendor compliance might get typically complex for large organizations with a variety of vendor requirements. Compliance with a set of vendor requirements may certainly improve the relationship while non-compliance might worsen the relationship leading to the eventual termination of the contract.
Sources of Vendor Compliance
Set of compliance requirements for a vendor emanates from the following sources.
- Contract signed between OEM and distributor
- Circulars from OEM
- Supplier meets
- Conventional practice (Nothing would be said in the contract but compliance would be followed as a convention)
The degree of risk of non-compliance is directly proportional to the amount of deviation from the compliance set by the OEM. Typical risks of non-compliance are
- Penalties or fines
- Displeasure note
- Downgrading of partner status (from gold to silver partner)
- Reduction of product portfolio
- Liquidated damages
- Legal cases
- Withdrawal of Marketing Development Fund (MDF)
- Termination of contract
- Loss of reputation with OEM
It is a software where all the compliance requirements of an organization are uploaded vendor wise so as to alert the concerned Business Manager to take appropriate action in a timely manner. By computerizing the entire compliance management, organization drastically reduce the risks of its non-compliance.
Features of Vendor Compliance Management System
A Vendor compliance management system has the following features.
- A vendor wise dashboard to monitor the compliance activity
- Alert the concerned Business Manager in time to fulfill the compliance activity
- Escalate the non-compliance internally to the management
- Automate the generation of compliance reports
- Act as a repository for the list of compliances
- Generate non-conformance report
A vendor compliance management system benefits the organization in the following ways.
- Timely information of compliance is available to Business Managers.
- Management have a visibility on the compliance levels.
- Competitive advantage to distributing organization.
- Significant time savings.